Reforms to the current legislation that governs sick pay in Ireland are being floated by Minister for Social Protection, Deputy Joan Burton. The stated aims of reforming the current statutory sick pay system are to cut Exchequer spending and to stem the flow of employees moving from illness benefit to disability benefit payments and effective removal from the labour force. The major fallout of these reforms would be to see employers in Ireland baring more of the cost of the provision of sick pay. As it stands illness benefits are largely paid out of the national social insurance fund to which employers in Ireland contribute through their PRSI payments.
Deputy Burton pointed out that illness and disability benefit payments are costing the taxpayer around €1.8 billion a year. These reforms were first suggested in advance of last December’s budget but due to heavy opposition from back benchers and employers groups the plans were shelved. Not for long however, as the Department of Social Protection has recently hosted a consultative forum on the reforms.
Heavy weight keynote speakers, like OECD Deputy Director John Martin and the National Director of Health and Work for the UK, Dame Carol Black, included in their addresses to the forum the distance Ireland’s current system stands from both its European neighbours and other OECD countries. Ireland is differs greatly across OECD countries and in particular our European neighbours with regards our sick pay system. In general, these countries have taken a significantly different approach to administering their sick pay thus providing part of the rationale behind the changes proposed.
Dame Carol Black has suggested the development of a more employee wellbeing focus to illness benefit with much more investment from the employer. This may be a reflect of the worry being caused to governments over recent trends that have seen more and more employees, especially young people, moving from sick pay to disability benefit. The loss of these individuals is of concern to governments already worried about the continued health of the European labour market.
Issues highlighted by the forum include the pay-in period for employers. At present this is three days in Ireland. Reforms would see this moving to between one to four weeks. A move which it is claimed will save the taxpayer between €23 -€89 million a year. The other major proposal was to increase the level of benefit paid but to simultaneously shorten the length of time over which benefit is paid thus bringing Ireland in line with the dominant structure across the OECD and as a measure towards discouraging the ‘drift’ from sick pay to disability benefits.
The reforms, the forum suggests, would bring employers and public authorities closer together in dealing with sick pay. While these reforms were originally floored last December there was little support for them. Now they have again surfaced as the Government looks for ways to cut public spending. Increasing pressure on the PRSI system has brought the issue to the fore.
While the benefits to the public taxpayer are obvious and immediate, the benefits to employers are less clear. The reforms have been the topic of a recent Dáil debate were Deputy Minister Willie O’Dea voiced opposition to the reforms. He suggested that employers already shoulder a considerable proportion of the burden through their PRSI contributions, quoting a figure of some €5 billion paid in by employers in 2010 and accused the Government of putting up barriers to job creation. He is not alone in his criticism of the proposals. Deputy Charles Flanagan called the measures anti-business and anti-job. Deputy Mary Mitchell O’Connor also voiced reservations suggesting that the reforms were “an expense too far”
Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton would not be drawn by Deputy O’Deas comments. Reminding Deputy O’Dea that illness benefit is the responsibility of the Minister for Social Protection, Deputy Richard Bruton was at pains to stress that while the forum was a first step towards change there remained much to be discussed before concrete proposals could be put forward. However, he did make mention of Exchequer spending in relation to illness benefit, highlighting the increase from €330 million in 2001 to €876 million in 2011. While stressing that as yet discussions were at the consultative process he did not rule out a cost burden being placed on the employer. On the contrary he said that further work would be need in accessing the potential costs on the employers and tellingly on how these costs might be borne by businesses.
While both Deputy Joan Burton and Deputy Richard Burton have stressed the need for further discussion and consultation on the issue of sick pay reform it seemed likely that employers could expect to become more involved in the payment of sick benefit. Pressures to cut public spending and the ever present pressure to conform to a European standard will likely see Ireland’s system move to incorporate a more EU friendly approach to illness benefit.
However, last week in a bizarre twist, Taoiseach Enda Kenny appeared to have put a spanner in the works and spoke of his intentions to significantly water down any plans to make employers pay for sick pay. He claimed that he did not wish to put any obstacles in the way of employers and he twice singled out the Public Sector as the source of the biggest absenteeism problems.
So what exactly this will mean for employers is anybody’s guess. While Enda Kenny intends to water-down any plans Joan Burton may have, the extent of that ‘watering-down’ is currently unclear. No doubt we will hear further details of any sick pay proposals as the year progresses, but it is likely that we may not have a definite decision until Budget 2013 in December. We will of course keep our clients updated as to any developments in this regard as further information becomes available.
